-- Posted Thursday, 12 December 2013 | | Disqus

Bank traders who set the price of gold in the trading pits of the futures exchanges have shifted their positions. That is what explains the recent strength of the gold price despite the imminent start to a winding up of the QE money printing program.

The TF Metals Report said: ‘The latest Bank Participation Report showed the most bullish extreme (for gold prices) seen yet. The combined position of the 24 US and non-US banks surveyed showed a net long position of 43,369 contracts, up from 10,254 last month and exceeding by 30 per cent the previous extreme seen in the survey from August 6th when the banks revealed a net long position of 37,434.’

Short covering

Bloomberg commented: ‘Markets seem to have already priced in the possibility of a December tapering of QE as prices did not show any weakness after last week’s stronger than expected non-farm payrolls data. Rather, gold has risen and hedge funds have rushed to cover their short positions ahead of the Fed meeting next week and due to growing concerns of a short squeeze.’

A short squeeze is what happens to traders caught on the wrong side of a rising market. They naturally always try to position themselves on the winning side and leave the less well informed investing public on the other side.

Another way to understand this is to think that the market has gotten ahead of itself in writing down the price of gold. Money printing is only going to slowdown, not stop. This is the reaction in the other direction. Buy on the rumor, sell on the news in the case of shorting gold.

It’s confusing and that’s the way the banks like to play it with only their proprietory trading desks having the true picture. Is that a manipulation of the gold price? Well what else would you call it? Price discovery?

http://www.arabianmoney.net/

-- Posted Thursday, 12 December 2013 | Digg This Article | Source: GoldSeek.com

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